Hello, DOW 4,000
How many banks (like Morgan Stanley) that the government is propping up are trying to profit by driving Ford (that the government is also propping up) into the ground? Am I unreasonable to think that subsidizing both while one cannibalizes the other doesn't make any sense? Anyhow, this morning Paul Krugman complains, again, about the Obama administration's foot-dragging on really fixing the banks. Krugman marvels at administration officials' resistance to nationalization, but their "free-market" ideology shouldn't be such a surprise to him: surely he knows how people from the University of Chicago think about economics. And this is the heart of the problem. Barack Obama always was too cozy with hard-core Chicago "free-market" ideologues and now he's finding it impossible to break away from their influence. It wouldn't be unfair to describe this as a cult phenomenon.
That's fine when isolated in academic tea rooms. In the case of the Great Recession, however, it's catastrophic. The Obama administration's unwillingness and inability to deal rationally with bad banks poisons the rest of the financial system. No wonder the DOW keeps plunging.
And there's one other thing. How much of the financial bailout is going to hedge funds that possess derivates that are the equivalent of shorts against the economy? I suspect it's a lot, but I don't know. Regardless how much it is, the public has a right to know where the money ends up. But so far, we've been treated just like commercially raised mushrooms. To be on the safe side we should probably freeze all derivatives trading until it's completely transparent, and maybe not even then... but that's another question.
In an ideal world President Obama would replace his entire economic team and start over. Of course, he won't. Even in the real world it doesn't seem likely that they'll make any significant course corrections until they're banged over the head repeatedly with a two by four. I have a bad feeling about where this is going.
Posted by George Kenney on March 6, 2009 8:26 AM 
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Comments
I am with you in the bad feeling department. Being a curmudgeon/worry wart used to at least make me feel different or special. Now it is a large crowd. We the worried.
The one correction to this post that I'd venture is that a two-by-four is too hard to swing efficiently. Better to get the point across, I suggest a broom handle.
That said, I again must say this feels bad, very bad. Unless I stop thinking about it. I'm glad to have work to worry about and pay attention to.
The idea that we will regain our footing or get ourselves back on track... Choose a metaphor. Bull. We are not going back to anything. We are going through a massive change and we need to reset all manner of fixtures and motives.
Buckle up. Here comes the further impact.
Posted by: Peter | March 6, 2009 10:37 AM
Excellent... I'm in complete agreement. I found it disheartening when Gordon Brown's visit was played down. Brown's response during the critical first weeks of the crisis was precise and, in my humble opinion, spot on: nationalize the banks and get rid of uncertainty. Brown had the answers, but Obama didn't want to hear them.
Posted by: John N. | March 6, 2009 10:56 AM